Wednesday, August 31, 2011

Japan approves renewable energy feed-in-tariff (FIT): Pressure increases on North American jurisdictions and EU countries to follow suit

Japan's upper chamber has just approved a new law implementing a feed-in-tariff policy for renewable energy. The law will take effect July, 2012 and sets a target of 30,000 MW of new renewable development within the next 10 years.

This new FIT in Japan has wide-reaching global implications for the EU and North America. The following countries now have feed-in-tariffs for renewable energy:

- China (2nd largest economy in the world)
- Japan (3rd largest economy in the world)
- Germany (4th largest economy in the world)

A key feature of the new Japanese FIT law is the creation of a special parliamentary committee to determine the details of the program, including specific tariffs. In the past, this function would normally have been assigned to the powerful Ministry of Economy, Trade and Industry.

While specific details have not been released the Japanese FIT program will be tailored to 20-year contracts for wind, solar, biomass, geothermal and small hydro. The tariffs are cost-based and include cost recovery from utility ratepayers with reduction for heavy industrial users. The program will be reviewed every three years.

As in Germany, heavy industry in Japan can apply for a reduction in the surcharge on electricity to support the program. Similarly, those affected by the Great East Japan Earthquake will not have to pay the surcharge for the program through the end of March 2013, according to the Japan Electric Association.

Reuters reports that a ruling party lawmaker said he expects the tariff for solar PV to start at 40 Yen per kilowatt-hour ($0.50 CAD/kWh), and the tariff for wind energy to start at 20 Yen per kilowatt-hour ($0.25 CAD/kWh).

If implemented as suggested, the wind energy tariff would be among the highest in the world.

The widely expected passage of the new law has unleashed a burst of entrepreneurial activity not seen in Japan for some time with domestic developers like Japan Wind Development (JWD) well-positioned to take advantage of the FIT.

Sources (in part): Reuters, Paul Gipe in

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